| Significant Accounting Policies | Significant Accounting Policies Consolidated Financial Statements include the accounts of Fossil Group, Inc., a Delaware corporation, and its subsidiaries (the "Company"). The Company is a leader in the design, development, marketing and distribution of contemporary, high quality fashion accessories on a global basis. The Company's products are sold primarily through department stores, specialty retailers, Company-owned retail stores and commercial websites worldwide. The Company reports on a fiscal year reflecting the retail-based calendar (containing 4-4-5 week calendar quarters). References to fiscal years 2018 , 2017 and 2016 are for the fiscal years ended December 29, 2018 , December 30, 2017 and December 31, 2016 , respectively. All intercompany balances and transactions are eliminated in consolidation. Effective for the fourth quarter of fiscal year 2018, the Company made changes to the presentation of reportable segments to reflect changes in the way its chief operating decision maker evaluates the performance of its operations, develops strategy, and allocates capital resources. Certain peripheral revenue generating activities related to the Company's factories and intellectual property previously recorded within the Company's Americas, Asia and Europe segments have been reclassified to Corporate. The Company's historical segment disclosures have been recast to be consistent with its current presentation. Use of Estimates is required in the preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Management makes estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates and judgments, including those related to product returns, inventories, long-lived assets and trade names, income taxes, warranty costs, hedge accounting and stock-based compensation. Management bases its estimates and judgments on historical experience and on various other factors that it believes are reasonable under the circumstances. Management estimates form the basis for making judgments about the carrying value of the assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates under different assumptions or conditions. Concentration of Risk involves financial instruments that potentially expose the Company to concentration of credit risk and consist primarily of cash investments and accounts receivable. The Company places its cash investments with high-credit quality financial institutions and currently invests primarily in corporate debt securities and money market funds with major banks and financial institutions. Accounts receivable are generally diversified due to the number of entities comprising the Company's customer base and their dispersion across many geographic regions. The Company believes no significant concentration of credit risk exists with respect to these cash investments and accounts receivable. A significant portion of sales of the Company's products are supplied by manufacturers located outside of the U.S., primarily in Asia. While the Company is not dependent on any single manufacturer outside the U.S., the Company could be adversely affected by political or economic disruptions affecting the business or operations of third-party manufacturers located outside of the U.S. In fiscal year 2018 , 49% of the Company's global watch production was assembled or procured through wholly or majority-owned factories. The Company has entered into multi-year, worldwide exclusive license agreements for the manufacture, distribution and sale of products bearing the brand names of certain globally recognized fashion companies. Sales of the Company's licensed products amounted to 46.6% , 47.0% and 47.6% of the consolidated net sales for fiscal years 2018 , 2017 and 2016 , respectively, of which MICHAEL KORS ® product sales accounted for 22.6% of the consolidated net sales for both fiscal year 2018 and 2017 and 22.7% for fiscal year 2016 . Cash Equivalents are considered all highly liquid investments with original maturities of three months or less. Restricted Cash was comprised of long-term restricted cash balances of $7.5 million and $0.4 million as of December 29, 2018 and December 30, 2017 , respectively, primarily for pledged collateral to secure bank guarantees for the purpose of obtaining retail space. This restricted cash is reported in intangible and other assets—net in the Company’s consolidated balance sheets as a component of long-term assets. Accounts Receivable at the end of fiscal years 2018 and 2017 are stated net of doubtful accounts of approximately $14.0 million and $12.9 million , respectively. Inventories are stated at the lower of cost and net realizable value, including any applicable duty and freight charges. Inventory held at consignment locations is included in the Company's finished goods inventory, and at the end of fiscal years 2018 and 2017 , was $43.7 million and $54.5 million , respectively. Investments in which the Company has significant influence over the investee are accounted for utilizing the equity method. If the Company does not have significant influence over the investee, the cost method is utilized. The Company's cost method investment was $0.5 million at the end of both fiscal years 2018 and 2017 . Property, Plant and Equipment is stated at cost less accumulated depreciation and amortization. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets of 30 years for buildings, generally five years for machinery and equipment and furniture and fixtures and two to seven years for computer equipment and software. Leasehold improvements are amortized over the shorter of the lease term or the asset's estimated useful life. Property, plant and equipment are evaluated for impairment whenever events or conditions indicate that the carrying value of an asset may not be recoverable based on expected undiscounted cash flows related to the asset. Property, plant and equipment impairment losses of underperforming Company-owned retail stores of approximately $1.7 million , $8.0 million and $13.5 million were recorded in restructuring charges in fiscal years 2018 , 2017 and 2016 , respectively, and impairment losses of approximately $1.9 million , $1.3 million and $0.8 million were recorded in selling, general, and administrative ("SG&A") in fiscal years 2018 , 2017 and 2016 , respectively. Additionally, in fiscal years 2018, 2017 and 2016, the Company recorded non-impairment losses related to the disposal of property, plant and equipment of $0.6 million , $0.4 million and $1.5 million , respectively, included in restructuring charges in the Company’s consolidated statements of income (loss) and comprehensive income (loss). Goodwill and Other Intangible Assets include the acquisition cost in excess of net assets acquired (goodwill), trademarks, trade names, developed technology, customer lists and patents. Trademarks, trade names with finite lives, developed technology, customer lists and patents are amortized using the straight-line method over their estimated useful lives, which are generally three to 20 years . Goodwill and other indefinite-lived intangible assets, such as indefinite-lived trade names, are evaluated for impairment annually as of the end of the fiscal year. Additionally, if events or conditions were to indicate an indefinite-lived intangible asset may not be recoverable, the Company would evaluate the asset for impairment at that time. Impairment testing compares the other intangible assets with its fair value. When the carrying amount of the intangible assets exceeds its fair value, an impairment charge is recorded. The Company had three reporting units for which it evaluated goodwill for impairment. In fiscal year 2017, goodwill was deemed fully impaired and accordingly the Company recognized a pre-tax impairment charge in operations of $202.3 million , $114.3 million and $42.9 million in the Americas, Europe and Asia segments, respectively. The fair values of the Company's indefinite-lived SKAGEN ® and MICHELE ® trade names were estimated using the relief from royalty method. During the second quarter of fiscal 2018, the SKAGEN trade name with a carrying amount of $27.3 million was written down to its implied fair value of $21.1 million , resulting in a pre-tax impairment charge of $6.2 million . A reduction in expected future cash flows negatively affected the valuation compared to previous valuation assumptions. Due to the inherent uncertainties involved in making the estimates and assumptions used in the fair value analysis, actual results may differ, which could alter the fair value of the trade names and possibly result in impairment charges in future periods. In fiscal year 2017 , impairment charges of $28.3 million , $11.8 million and $7.6 million were recorded related to the SKAGEN, MISFIT ® and MICHELE trade names, respectively. No impairment charges were recorded in fiscal year 2016 . Accrued Expenses includes liabilities relating to warranties, duty, deferred compensation, gift cards, foreign exchange forward contracts ("forward contracts"), deferred rent, and other accrued liabilities which are current in nature. Other Long-Term Liabilities includes obligations relating to asset retirements, deferred rent, forward contracts and defined benefits relating to certain international employees that are not current in nature. Cumulative Translation Adjustment is included as a component of accumulated other comprehensive income (loss) and reflects the adjustments resulting from translating the financial statements of foreign subsidiaries into U.S. dollars. The functional currency of the Company's foreign subsidiaries is the currency of the primary economic environment in which the entity operates, which is generally the local currency of the country. Accordingly, assets and liabilities of the foreign subsidiaries are translated to U.S. dollars at fiscal year-end exchange rates. Income and expense items are translated at average monthly exchange rates. Cumulative translation adjustments remain in accumulated other comprehensive income (loss) and are reclassified into earnings in the event the related foreign subsidiary is sold or liquidated. Foreign Transaction Gains and Losses are those changes in exchange rates of currencies not considered the functional currency that affects cash flows and the related receivables or payables. The Company incurred net foreign currency transaction gains (losses), including gains and losses associated with the settlement of forward contracts, of approximately $(5.8) million , $7.8 million and $8.7 million for fiscal years 2018 , 2017 and 2016 , respectively. These net gains (losses) have been included in other income (expense)—net in the Company's consolidated statements of income (loss) and comprehensive income (loss). Litigation Liabilities are estimated amounts for claims that are probable and can be reasonably estimated and are recorded in accrued expenses-other in the Company's consolidated balance sheets. The likelihood of a material change in these estimated liabilities would be dependent on new claims that may arise, changes in the circumstances used to estimate amounts for prior period claims and favorable or unfavorable final settlements of prior period claims. As additional information becomes available, the Company assesses the potential liability related to new claims and existing claims and revises estimates as appropriate. As new claims arise or circumstances change relative to prior claim assessments, revisions in estimates of the potential liability could materially impact the Company's consolidated results of operations and financial position. Revenues from sales of the Company's products including those that are subject to inventory consignment agreements are recognized when control of the product is transferred to the customer and in an amount that reflects the consideration the Company expects to be entitled in exchange for the product. The Company accepts limited returns and may request that a customer return a product if the customer has an excess of any style that the Company has identified as being a poor performer for that customer or geographic location. The Company continually monitors returns and maintains a provision for estimated returns based upon historical experience and any specific issues identified. In fiscal year 2018, under ASU 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASU 2014-09"), product returns are accounted for as reductions to revenue and cost of sales and increases to customer liabilities and other current assets to the extent the returned product is resalable. In fiscal year 2017, under prior accounting guidance, product returns were accounted for as reductions to revenue, cost of sales, accounts receivable and an increase in inventory to the extent the returned product is resalable. While returns have historically been within management's expectations and the provisions established, future return rates may differ from those experienced in the past. In the event that the Company's products are performing poorly in the retail market and/or it experiences product damages or defects at a rate significantly higher than the historical rate, the resulting returns could have an adverse impact on the operating results for the period or periods in which such returns occur. The Company recorded an estimated returns provision of approximately $67.1 million in accrued expenses and $75.2 million in accounts receivable-net as of the end of fiscal years 2018 and 2017 , respectively. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales. See Note 2—Revenue, for more information regarding the Company's revenue recognition policy. Cost of Sales includes raw material costs, assembly labor, assembly overhead including depreciation expense, assembly warehousing costs and shipping and handling costs related to the movement of finished goods from assembly locations to sales distribution centers and from sales distribution centers to customer locations. Additionally, cost of sales includes customs duties, product packaging cost, royalty cost associated with sales of licensed products, the cost of molding and tooling and inventory shrinkage and damages. Operating Expenses include SG&A, goodwill and trade name impairments and restructuring charges. SG&A expenses include selling and distribution expenses primarily consisting of sales and distribution labor costs, sales distribution center and warehouse facility costs, depreciation expense related to sales distribution and warehouse facilities, the four-wall operating costs of the Company's retail stores, point-of-sale expenses, advertising expenses and art, design and product development labor costs. SG&A also includes general and administrative expenses primarily consisting of administrative support labor and "back office" or support costs such as treasury, legal, information services, accounting, internal audit, human resources, executive management costs and costs associated with stock-based compensation. Restructuring charges include costs to reorganize, refine and optimize the Company’s infrastructure and store closures. See Note 20—Restructuring for additional information on the Company’s restructuring plan. Advertising Costs for in-store and media advertising as well as co-op advertising, catalog costs, product displays, show/exhibit costs, advertising royalties related to the sales of licensed brands, internet costs associated with affiliation fees, printing, sample costs and promotional allowances are expensed as incurred within SG&A. Advertising costs were $181.0 million , $207.1 million and $238.4 million for fiscal years 2018 , 2017 and 2016 , respectively. Warranty Costs are included in SG&A. The Company records an estimate for future warranty costs based on historical repair costs and adjusts the liability as required. Warranty costs have historically been within the Company's expectations and the provisions established. If such costs were to substantially exceed estimates, this could have an adverse effect on the Company's operating results. See Note 5—Warranty Liabilities, for more information regarding warranties. Research and Development Costs are incurred primarily through the Company's in-house engineering team and also through some outside consulting and labor and consist primarily of personnel-related expenses, tooling and prototype materials and overhead costs. The Company’s research and development ("R&D") expenses are related to designing and developing new products and features and improving existing products. The Company's R&D expenses are recorded in SG&A and were $38.2 million , $42.8 million and $38.6 million in fiscal years 2018 , 2017 and 2016 , respectively. Noncontrolling Interest is recognized as equity in the Company's consolidated balance sheets, is reflected in net income attributable to noncontrolling interest in the consolidated statements of income (loss) and comprehensive income (loss) and is captured within the summary of changes in equity attributable to controlling and noncontrolling interests. Noncontrolling interests represent ownership interests in the Company's subsidiaries held by third parties. Other Comprehensive Income (Loss) which is reported in the consolidated statements of income (loss) and comprehensive income (loss) and consolidated statements of stockholders' equity, consists of net income and other gains and losses affecting equity that are excluded from net income. The components of other comprehensive income (loss) primarily consist of foreign currency translation gains and losses and net realized and unrealized gains and losses on the following: (i) derivatives designated as cash flow hedges and (ii) the Company's defined benefit plans. Earnings (Loss) Per Share ("EPS") is based on the weighted average number of common shares outstanding during each period. Diluted EPS adjusts basic EPS for the effects of dilutive common stock equivalents outstanding during each period using the treasury stock method. The following table reconciles the numerators and denominators used in the computations of both basic and diluted EPS (in thousands except per share data): Fiscal Year 2018 2017 2016 Numerator: Net income (loss) attributable to Fossil Group, Inc. $ (3,478 ) $ (478,172 ) $ 78,868 Denominator: Basic EPS computation: Basic weighted average common shares outstanding 49,196 48,468 48,136 Basic EPS $ (0.07 ) $ (9.87 ) $ 1.64 Diluted EPS computation: Basic weighted average common shares outstanding 49,196 48,468 48,136 Stock options, stock appreciation rights and restricted stock units — — 187 Diluted weighted average common shares outstanding 49,196 48,468 48,323 Diluted EPS $ (0.07 ) $ (9.87 ) $ 1.63 Approximately 5.1 million and 4.6 million weighted average shares issuable under stock-based awards were not included in the diluted EPS calculation in fiscal years 2018 and 2017 , respectively, because they were antidilutive, including approximately 1.2 million weighted performance-based shares in both fiscal years. Approximately 2.3 million weighted average shares issuable under stock-based awards were not included in the diluted EPS calculation in fiscal year 2016 because they were antidilutive. Approximately 0.3 million weighted average performance-based shares were not included in the diluted EPS calculation in fiscal year 2016 as the performance targets were not met. Income Taxes are provided for under the asset and liability method for temporary differences in assets and liabilities recognized for income tax and financial reporting purposes. Deferred tax assets are periodically assessed for the likelihood of whether they are more likely than not to be realized. Tax benefits associated with uncertain tax positions are recognized in the period in which one of the following conditions is satisfied: (i) the more likely than not recognition threshold is satisfied; (ii) the position is ultimately settled through negotiation or litigation; or (iii) the statute of limitations for the taxing authority to examine and challenge the position has expired. Tax benefits associated with an uncertain tax position are derecognized in the period in which the more likely than not recognition threshold is no longer satisfied. The Global Intangible Low-Taxed Income (“GILTI”) provisions of the Tax Act requiring the inclusion of certain foreign earnings in U.S. taxable income first applied in fiscal year 2018. The GILTI tax was accounted for as incurred under the period cost method. Accounting for the income tax effects of the Tax Act requires significant judgments and estimates in the interpretation and calculations of the provisions of the Tax Act. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements for fiscal year 2017 as permitted under Staff Accounting Bulletin No. 118, (“SAB 118”) Income Tax Accounting Implications of the Tax Cuts and Jobs Act. During 2018, the Company completed its accounting for the tax effects of the enactment of the Tax Act and made adjustments to the provisional amounts. In addition, the Company's valuation allowance analysis is affected by various aspects of the Tax Act, including the new limitation on the deductibility of interest expense and the impact of GILTI. Those adjustments may materially impact the provision for income taxes and the effective tax rate in the period in which the adjustments are made. Recently Issued Accounting Standards In August 2018, the Financial Accounting Standards Board ("FASB") issued ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40) ("ASU 2018-15"). ASU 2018-15 aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company does not expect this standard to have a material impact on the Company's consolidated results of operations or financial position. In August 2018, the FASB issued ASU 2018-14, Compensation-Retirement Benefits-Defined Benefit Plans-General (Subtopic 715-20): Disclosure Framework-Changes to the Disclosure Requirements for Defined Benefit Plans ("ASU 2018-14") . ASU 2018-14 removes certain disclosures that are not considered cost beneficial, clarifies certain required disclosures and adds additional disclosures. The guidance is effective for fiscal years ending after December 15, 2020. The Company does not expect this standard to have a material impact on the Company's consolidated results of operations or financial position. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement ("ASU 2018-13"). ASU 2018-13 eliminates certain disclosure requirements related to the fair value hierarchy, adds new disclosure requirements related to the changes in unrealized gains and losses for recurring Level 3 fair value measurements and disclosing the range and weighted average of significant observable inputs used to develop Level 3 fair value measurements and modifies certain disclosure requirements related to measurement uncertainty for fair value measurements. The guidance is effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019. The Company does not expect this standard to have a material impact on the Company's consolidated results of operations or financial position. In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("ASU 2017-12"). ASU 2017-12 amends and simplifies hedge accounting guidance in order to enable entities to better portray the economics of their risk management activities. The guidance is effective for fiscal years beginning after December 15, 2018, including interim periods within those periods. Early adoption is permitted. The Company adopted ASU 2017-12 on the first day of fiscal year 2019. Adoption will result in a portion of hedge settlement activity being recognized in cost of sales. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification® (“ASU 2016-02”), which supersedes the existing guidance for lease accounting, Leases (Topic 840) . In order to improve transparency and comparability between companies, ASU 2016-02 requires lessees to recognize leases on their balance sheets, and modifies accounting, presentation and disclosure for both lessors and lessees. The Company's leases primarily consist of retail space, offices, warehouses, distribution centers and vehicles. The Company has substantially completed its assessment of the standard as well as implementation of its leasing software, including data upload, and is continuing to finalize its calculations, including validation procedures. The Company is continuing to establish new processes and internal controls required to comply with the new lease accounting and disclosure requirements set by the new standard. ASU 2016-02 is effective for annual periods, and interim periods within those years, beginning after December 15, 2018. The Company is using the package of practical expedients that allows companies to not reassess: (1) whether any expired or existing contracts are or contain leases, (2) lease classification for any expired or existing leases and (3) initial direct costs for any expired or existing leases. The Company is making accounting policy elections to treat the lease and non-lease components of leases as a single lease component and to exempt leases with an initial term of twelve months or less from balance sheet recognition. Consequently, short-term leases will be expensed over the lease term. The Company is not electing to adopt the hindsight practical expedient and therefore will maintain the lease terms previously determined under ASC 840. The Company is adopting ASU 2016-02 in the first quarter of fiscal year 2019 using the modified retrospective approach. As part of the adoption, the Company is assessing right-of-use assets for impairment. Although the Company is continuing to assess the potential impacts of ASU 2016-02, the Company expects to recognize a cumulative-effect adjustment to the opening balance of retained earnings upon adoption as a result of previous store impairment and a previous sale leaseback transaction, and the Company estimates recording right-of-use assets and lease liabilities in the range of $330 million to $430 million . The standard is not expected to have a significant impact on the Company's consolidated results of operations or cash flows. Recently Adopted Accounting Standards In May 2014, the FASB issued ASU 2014-09 and subsequently issued guidance that amended ASU 2014-09. ASU 2014-09 affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets, unless those contracts are within the scope of other standards. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted ASU 2014-09 on December 31, 2017, the first day of fiscal 2018, using the modified retrospective approach. Under this method of adoption, guidance in ASU 2014-09 was applied to open contracts as of December 30, 2017, the end of fiscal 2017. The cumulative effect of initially applying the new revenue standard was a reduction to opening retained earnings, with the impact primarily related to the accelerated recognition of markdowns. Results from reporting periods beginning on December 31, 2017 are presented under ASU 2014-09, while prior period amounts are not adjusted. See Note 2—Revenue for additional disclosures about the Company’s revenue recognition policy and the impact of adoption. In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) : Restricted Cash ("ASU 2016-18"). ASU 2016-18 requires that a statement of cash flows explain the change during the period in total cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. ASU 2016-18 was effective for the Company beginning fiscal year 2018 and changed the presentation of the condensed consolidated statements of cash flows to now include restricted cash and cash equivalents as well as previously reported cash and cash equivalents in reconciling the period change. The Company adopted ASU 2016-18 using a retrospective transition method. The following table provides a reconciliation of the cash, cash equivalents, and restricted cash balances as of December 29, 2018 , December 30, 2017 and December 31, 2016 that are presented in the condensed consolidated statement of cash flows (in thousands): December 29, 2018 December 30, 2017 December 31, 2016 Cash and cash equivalents $ 403,373 $ 231,244 $ 297,330 Restricted cash included in prepaid expenses and other current assets 31 34 32 Restricted cash included in intangible and other assets-net 7,479 377 500 Cash, cash equivalents and restricted cash $ 410,883 $ 231,655 $ 297,862 In February 2018, the FASB issued ASU 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income ("ASU 2018-02"). The guidance allows reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the application of the U.S. Tax Cuts and Jobs Act. The guidance is effective for annual and interim reporting periods beginning after December 15, 2018 with early adoption permitted. The Company elected to early adopt this guidance during the fourth quarter of fiscal year 2018, resulting in the reclassification of $2.0 million of stranded tax effects from accumulated other comprehensive income to retained earnings. The following provisions, which had no material impact on the Company’s financial position, results of operations or cash flows, were also adopted effective the first quarter of fiscal year 2018: • ASU 2018-03, Technical Corrections and Improvements to Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities • ASU 2017-09, Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting • ASU 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business • ASU 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory • ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments • ASU 2016-04, Liabilities—Extinguishments of Liabilities (Subtopic 405-20)- Recognition of Breakage for Certain Prepaid Stored-Value Products |
